There is plenty to worry about if your are retired or about to retire. The value of your pension pot has probably fallen over summer. Plus annuity rates are down, inflation is up, and many income drawdown investors are facing a shock drop in income.
Ongoing stock market volatility has meant someone retiring now could be as much as 25 per cent worse off than someone who retired six weeks ago with the same fund, according to MetLife. A fund delivering a £10,000 income six weeks ago would return £7,500 now, equating to a permanent loss of £50,000 income over 20 years. Annuity rates suffered the biggest monthly fall on record in August, dropping 5 per cent, which added to the pain. In addition, drawdown income limits have been cut by the combined effect of falling gilt yields and a government imposed reduction to the maximum income.
So you may be having sleepless nights about whether you will be able to generate enough income, and whether your money will last for the next 30 years. Can you afford to take a holiday of a lifetime? Will your savings pots, pensions, Isa and share portfolios get you through with enough left over for care home fees? And the final glommy thought – will there be enough to pay for your funeral? (The cost of dying has risen to £7,248, according to figures from Sun Life Direct). And in the end, will there be anything left over for the kids?
The majority of people in the UK in or nearing retirement are afraid they will not have enough money to continue funding their lifestyle after they retire, according to a study from RetireEasy.co.uk.
The research found that of those aged 50-70, 79 per cent worry about their financial future. But almost two-thirds of them (65 per cent) worry about this on a monthly basis or more frequently (one in seven worries daily).
I don’t often plug software products but I think the RetireEasy is offering the ‘holy grail’ solution that many of you have been waiting for. Instead of spending £200 an hour on services of a financial planner to give you an annual snapshot of your finances, for £79 you can buy into the service of www.retireasy.co.uk and do it yourself.
RetireEasy chief executive officer Richard Collinson, a retiree who spent six years developing the service says: “We found extremely difficult to formulate a figure that would give us clarity on how much we could spend in retirement without falling short. Once you factor in investment returns, liabilities and tax, this can be an unnecessarily complex process, which we have now provided a solution to.”
RetireEasy chairman Naomi Collinson adds: “Retirement should be a time when you relax and live life to the full. People shouldn’t be spending the best years of their life suffering from unnecessary hardship because they fear financial ruin. This service is all about empowerment and education.”
The online software program enables you to input all your financial details (pensions, Isas, share portfolio, house/mortgage, heirlooms, future work or windfall expectations) in a secure environment. It then models whether in different inflation or investment outcomes your money will last for whatever time period you choose. It is far superior to existing online budget planners, taking into account your tax rates too.
You can tweak all the input data as much as you like, modelling different scenarios as often as you like for a whole year, after which you can renew your subscription at a lower rate. I had a preview of this service and it looks very good and well worth that £79 for a better night’s sleep.